Riyadh has cautioned the public against investing in initial coin offerings (ICOs) due to the high risk, potential losses of capital and alleged fraud in the cryptocurrency market.
According to the Capital Market Authority, crypto investing and speculative trading are potentially risky due to the high volatility of virtual currencies, the insular nature of their valuation and the lack of proper regulation in the Kingdom.
The caution comes as the number of websites and advertisements for investment in digital currencies, as well as marketing campaigns on social media targeting Saudi citizens, has significantly increased in recent times.
The Saudi regulator backs similar warnings issued across the Gulf nations after bitcoin’s dramatic plunge earlier this year. The world’s leading cryptocurrency has lost over half of its value since reaching a record $20,000 in December, being currently valued at $8,500.
Earlier this month, the UAE’s Securities and Commodities Authority, the country’s markets regulator, cautioned the public over putting in initial coin offerings. The office sent a circular, warning traders against any fundraising done in cryptocurrencies including ICOs, initial token offerings, token pre-sale or token crowd-sale.
ICOs are commonly used by corporations to raise funds. The scheme is similar to Initial Public Offerings (IPOs), but instead of shares sold in a fiat currency and listed on the stock exchange, the firms sell digital tokens. Last year, nearly six billion dollars was raised in ICOs, according to cryptocurrency news website Cointelegraph.
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